Higher demand for space to stock government rice under the pledging project and the slowdown in exports due to the euro-zone crisis have recently pushed up the cost of renting warehouses by 10-15 per cent.

"The government's plan to use Don Mueang's warehouse for stocking rice and its search for more warehouses have sent warehouse costs flying. And many exporters have to store goods because of falling shipments," Thanit Sorat, vice chairman of the Federation of Thai Industries, said yesterday.

The cost of warehousing and logistics will continue to increase gradually because of higher demand for storage, he said.

About 95 per cent of the country's warehouses are now occupied. The government will face higher operating costs for inventorying rice if it needs to rent private warehouses, he said. The cost of Don Mueang's cargo terminals is also quite high compared with private warehouses as they were built to house products in good condition, which requires protection from humidity and flooding.

The average warehouse rent is Bt160-Bt190 per square metre per month. Don Mueang should be in the high Bt190s, Thanit said.

Using Don Mueang's warehouse would force the government to incur double handling costs, as it would have to pay high rent as well as for delivering rice from mills to the warehouse and for shipping from the warehouse to buyers.

The government would not be able to keep as much rice as it wants at Don Mueang because of the limited capacity, while the amount of pledged rice has passed 10 million tonnes.

The upcoming harvest season will also create a shortage of warehouses for holding rice if the government has no urgent plan to release old rice from its stockpiles, he said.

However, a source from the Public Warehouse Organisation (PWO) said the government still had adequate warehouses to stock rice.

The government is opening applications for warehouses and millers to participate in the new pledging project. So far, 708 millers have joined. The PWO said it would seek an area from the Air Force to renovate into a rice warehouse.

The agency surveyed space at the cargo terminal of Don Mueang International Airport. However, it said that despite the well-constructed building, there would be traffic problems inside the airport as more than 500 trailer-trucks would go in and out per day.

Somsak Wongwattanasarn, deputy director of the PWO, said the final decision on Don Mueang would be made by Commerce Minister Boonsong Teriyapirom.

The PWO surveyed Cargo Terminal II at the airport and found that the building is suited to storing rice but needs to be renovated in places such as the roof, which would require no more than Bt10 million for the work.

The organisation will also survey Air Force hangars in Lop Buri, Nakhon Sawan, Nakhon Ratcha-sima and Udon Thani.

It has to concentrate on locations that should be close to growing areas and good transport. If it finds a suitable place, it will propose it for approval from the prime minister.

Keeping rice in a warehouse for one year will cost Bt2 billion to Bt3 billion for maintenance.

Boonsong insisted that the government would continue to sell rice under government-to-government deals to Ivory Coast, despite United Nations sanctions on weapons and diamond trading with that West African country.

The UN embargo has not involved foodstuffs. The Thai government has sold rice to Ivory Coast on a friendship and humanitarian basis. Rice trading should not breach any policy, he said.

The Cabinet yesterday agreed to expand its sanctions on weapons and diamond trading with Ivory Coast through next year after the UN's extension of measures against this country. Thailand has signed a G2G contract worth US$145 million (Bt4.35 billion) with Ivory Coast for supplying 240,000 tonnes of rice. A Commerce Ministry source said Thailand had already been paid for this lot of rice.

The Cabinet also approved a budget of Bt20.85 billion to subsidise the second rice crop with total volume of 1.39 million tonnes under the pledging scheme.The money will be spent under the government pledging scheme for rice production over its projection.

Source: The Nation